A story on Bloomberg this morning uncharacteristically lacks a news hook but gives a good deal of color on counterparty risk in the credit default swaps market. The story argues that the other shoe may finally drop in the $62 trillion CDS market due to rising junk bond defaults. We’ve long seen that market as […]
Read more...The stock market is up so far today on mixed readings of the tea leaves. The Conference Board’s index of leading indicators rose unexpectedly, which elicited some positive reports, but Reuters was not impressed, noting that the 0.1% rise showed weakness but not a formal recession. The Wall Street Journal attributed the rise to analyst […]
Read more...Conventional wisdom is that markets are the best place to get unbiased forecasts, but we see a sharp divergence of views between what TIPS buyers and Treasury traders in general anticipate inflation rates will be versus consumer expectations and the continued high inflows of new funds into commodities. We’ve seen this sort of divergence before. […]
Read more...There has been a raft of articles about the Federal Reserve’s new found interest in the question of asset bubbles, suggesting that the Fed might be ready to shift policy and exhibit more willingness to rein them in. Yesterday, a page one Wall Street Journal story discussed at length research central bank chairman Bernanke has […]
Read more...The ECB has uncovered gambling in Casablanca. The central bank is shocked to learn that banks appear to be originating crappy assets solely for the purpose of dumping them in a liquidity facility intended to help them through a rough patch, not to provide an ongoing subsidy. Regulators should know better. Indulgent parents generally wind […]
Read more...I’m sure readers know of other super turkeys, but Floyd Norris in the New York Times did find a prime example of crappy paper. Note that he limited himself to securities, so CDOs were not candidates for this Hall of Shame award. The Merrill deal was a pool of seconds (“piggybacks”). Moody’s noted that this […]
Read more...Blackstone President Tony James said it may be premature to label the credit crisis over, although he did point to improving conditions in the market for LBO-related debt. However, one also has to wonder whether this call is to lower expectations for Blackstone’s performance, given the firm’s dreadful first quarter results. Oddly, Bloomberg reports the […]
Read more...In keeping with Bernanke’s cautionary remarks about the unsettled state of the markets, some debt market participants worry that the recovery will prove short lived. While few are forecasting a return to the near paralysis of early in the year, the combination of continued caution among lenders and a deteriorating economy could make debt dearer […]
Read more...Former Fed Chair Paul Volcker reiterated some of his concerns about the Fed’s recent moves and the evolution of the financial system in prepared remarks before the Joint Economic Committee of Congress. From the WSJEconomicsBlog: “Whatever claims might be made about the uniqueness of current circumstances, it seems inevitable that the nature of the Fed’s […]
Read more...Reader AK sent me a bit of Christmas in May: three hot-off-the presses reports, one from Morgan Stanley on the credit standing of US and European broker dealers, a Moody’s report on RMBS, and a UBS report on the subprime crisis. The Morgan Stanley report, although the shortest, was in some ways the most informative, […]
Read more...Moody’s issued the weakest warning it could about the two big monolines. Most observers did not expect the bond insurers’ last round of fundraising to carry them very far, and that view appears to be playing out on schedule. We may be moving towards a repeat the January-February drama, with the rating agencies saber rattling […]
Read more...It’s one thing when journalists and analysts offer worrisome forecasts about the markets, quite another when someone with good inside knowledge sounds an alarm. Satyajit Das, an expert in derivatives and risk management, best known as the author of Traders, Guns & Money, looks over the financial landscape and does not like what he sees. […]
Read more...The news on MBIA reveals a bit of revisionist reporting. The Armonk based bond insurer posted a first quarter loss of $2.4 billion. The Financial Times says that that red ink was twice what analysts expected; the initial story at Bloomberg (hat tip Andrew Clavell) apparently made similar comments. But the stock is up, and […]
Read more...The Financial Times has a long analysis, “Value to Unlock,” on how various financial players are starting to pick and choose among distressed mortgage assets. This may prove to be premature (recall how Wall Street firms eagerly bought subprime brokers through January 2007) and the housing market itself appears unlikely to hit its floor before […]
Read more...Bloomberg reports that the company that is the biggest property owner in downtown LA, with concentrated holdngs in the Little Tokyo section of Los Angeles is trading at a deep discount to book value minus borrowings. The reason? The company may not be able to refinance debt coming due. Now one may legitimately take book […]
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